Top stories before the bell on Friday

AbbyDeveney

Pre-open moves

Futures signaled a flat start to share trading. Investors were keeping an eye on crude, which again touched $60 a barrel, but slipped back. Data showed that orders for U.S.-made durable goods rose 5.5% in May, the biggest increase since March 2004, led by demand for new airplanes. Economists were expecting a hefty rise in aircraft orders.

Broker action

Morgan Stanley cut its view on the steel industry to cautious from in line, saying service center inventories have been slow to decline to desired levels, the U.S. dollar has strengthened against the euro and the latest Chinese steel production numbers were strong. While the broker said the investment case for steel has improved over the last three years, it recommended against committing new money to the group until fundamentals stabilize.

Morgan Stanley cut United States Steel Corp.
X, -1.61%
and Steel Dynamics, Inc.
STLD, -2.73%
to equal weight from overweight, saying it likes the business model for the companies but is recommending that investors postpone making new commitments. The broker said it's concerned that imports could pick up during the last quarter, putting additional pressure on prices.

Perry Ellis International
PERY, +0.42%
was upgraded to outperform from market perform at Wachovia on the belief that earnings growth could accelerate as the company pursues opportunities to expand its Savane brand.

Mattel Inc.
MAT, -0.67%
was downgraded to market perform from outperform at Piper Jaffray, which said that while there was little new news emerging from the toymaker's analyst meeting, "what news evolved was negative."

J.P. Morgan cut chicken producer Gold Kist, Inc.
GKIS
to neutral from overweight, saying the expiration of a lock-up period on controlling shareholders may create pressure on the shares.

Citigroup
C, -0.01%
said it'll sell its asset management business in exchange for the broker-dealer business of Legg Mason, Inc.
LM, +0.24%
in a deal valued at $3.7 billion. The deal includes $1.5 billion of Legg Mason's common and convertible preferred shares, and about $550 million in the form of a five-year loan. Upon closing, Citigroup will book an after-tax gain of approximately $1.6 billion. Legg Mason, Inc. said the deal will result in, "the transition of the firm into a major pure play global asset manager of equity and fixed-income products."

Guidant Corp.
GDT
said it's evaluating incidents of component failure in certain of its implantable cardiac defibrillator products. The company said it's voluntarily advising doctors about the safety of its Contak Renewal 3 and 4, Renewal 3 and 4 AVT, and Renewal RF products, and that it's apprised the Food and Drug Administration of this action. It added that the FDA may classify this action as a recall. Guidant said it's determined a switch in the defibrillators may become stuck in the closed position. It's confirmed four such occurrences out of 46,000 devices, with a fifth suspected. The stock fell 5.5% to $64.81 on volume of 35,504 on Instinet. Guidant is being acquired by Johnson & Johnson
JNJ, +0.53%

Chip maker Broadcom Corp.
BRCM
said it has agreed to settle shareholder class action litigation for $150 million cash, of which its insurance is expected to pay $40 million. It plans to take a $110 million charge in the second quarter, and pay it in the third quarter. "Given the strength of our balance sheet and our future prospects, we concluded that this settlement provides a reasonable opportunity to avoid the continuing costs and distraction of this litigation, and eliminates the chance, however slight, of a substantially greater financial exposure that is inherent in a jury trial," the company said.

HSBC Holdings
HBC, -0.04%
said it agreed to buy the private label credit card accounts of The Bon-Ton Stores Inc.
BONT, -1.37%
HSBC will pay the value of the customer account balances, estimated to be $300 million for the March 2005-ending quarter, plus a 5% premium. Earlier in June HSBC agreed to buy the private label credit card accounts of The Neiman Marcus Group.

Oracle Corp.
ORCL, +0.82%
has hired Gregory Maffei, the former chief financial officer of Microsoft Corp.
MSFT, +1.12%
as its president and chief financial officer, The Wall Street Journal reported. He succeeds Harry You, who quit in March. Maffei won't directly head strategy or acquisitions, but the appointment is likely to be seen as a signal that Oracle's recent buying spree is far from over, the report said.

Biotech firm Genentech Inc.
DNA, -3.57%
said it will pay $41 million to manufacturers and sees higher capital spending than previously anticipated. It said it will pay Amgen $30 million as part of an agreement to cancel the remainder of its Enbrel manufacturing obligations. Separately, the company will pay another manufacturing collaborator, who it did not name, an additional $11 million to "resolve an open issue." Genentech will incur the combined $41 million in expenses as part of cost of sales in the second quarter of 2005.

The Russell Microcap Index is scheduled to go into effect after the close of Friday's trading. The 2,000-stock benchmark is designed to measure the performance of the microcap segment, representing less than 3% of the U.S. equity market, according to Tacoma, Wash.-based Russell Investment Group. It includes the smallest 1,000 securities in the Russell 2000 Index as well the next 1,000 securities ranked below the small-capitalization Russell 2000.

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